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3 Top Pharmaceutical Stocks for 2024

By:Thomas Westwater

Prospects are good for Gilead, Lilly and Regeneron

  • Pharmaceutical stocks have jumped as acquisition sparks interest in the sector.
  • The pharmaceutical sector is lagging behind the S&P 500 amid a bullish backdrop.
  • GILD, LLY and REGN offer solid picks for traders in 2024 because of strong fundamentals and in-pipeline drugs that have upside potential.

Pharmaceutical stocks have gained some momentum recently, with the SPDR S&P Pharmaceuticals (XPH) exchange-traded fund (ETF) closing nearly 2% higher yesterday, compared to the S&P 500’s 0.10% loss.

Despite the recent outperformance, XPH has lagged behind the S&P 500 over the last twelve months. The U.S. benchmark rose 25% over that time compared to XPH’s 3.5% gain. Is it time for pharmaceutical stocks to catch up with the broader market?

We’ll explore three picks for 2024 that offer some potentially significant upside. We won’t focus on small-cap companies whose lives depend on a far-shot FDA approval but instead on companies with solid balance sheets and strong drug pipelines.

Gilead may acquire CymaBay

One of the largest biopharmaceutical companies in America, Gilead Sciences (GILD), is likely a familiar name. Most investors probably own it in some indirect way through an ETF in their retirement account or elsewhere.

The stock hasn’t offered the best returns recently, with the price down over 8% on a year-to-date basis. But GILD is making moves, and that could put it on a different trajectory.

On Monday, CymaBay Therapeutics (CBAY) rose 25.38% after GILD agreed to a $4.3 billion deal to acquire the company, extending a streak of acquisitions in the sector. The Food and Drug Administration (FDA) gave CymBay’s drug Seladelpar a priority review this week, which should speed up the drug’s review process. The acquisition beefs up GILD’s portfolio and gives it a potential money maker if Seladelpar gains approval.

Gilead Sciences (GILD)

Eli Lilly offers hot obesity drug

Eli Lilly (LLY) is up more than 26% since the start of the year, and those gains may continue after a stronger-than-expected earnings report crossed the wires earlier this month. Zepbound, one of LLY’s new drugs, saw over $175 million in revenue, which exceeded analysts’ estimates.

The drug is expected to become the best-selling drug of all time, and it is indeed on track to claim that title. And with more Americans at risk of obesity than ever before, the market for this money maker isn’t going away anytime soon.

Some estimates put the global obesity rate at 50% by 2030. That isn’t exactly a good thing from a health policy perspective, but it is a story that investors can take advantage of. It would be hard for drugs like Zepbound not to sell in today’s environment.

Eli Lilly (LLY)

Regeneron posts solid earnings

Regeneron Pharmaceuticals (REGN) is up about 8% this year and is coming off a solid quarter of earnings. The company reported earlier in February and saw earnings per share come across at $11.86 on an adjusted basis, well above analysts’ expectations.

One drug in Regeneron’s pipeline that investors are watching is Odronextamab, a drug for non-Hodgkin lymphoma. The FDA granted a priority review for the drug, and news of that review process is expected in late March. If positive, it could help Regeneron continue to pace higher.

Regeneron Pharmaceuticals (REGN)

Thomas Westwater, a tastylive financial writer and analyst, has eight years of markets and trading experience. @fxwestwater

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